532 B.R. 259
E.D. Va.2015Background
- Hilton (plaintiff) and its plan administrator (GBAC) sue Caesars Entertainment Corporation (CEC) alleging CEC failed to pay its agreed share (~31.75%) of liabilities to the Hilton Hotels Retirement Plan arising from a 1998 spin-off allocation and later Kifafi litigation.
- The Allocation Agreement and Distribution Agreement (governing the spin-off) allocate pension liabilities between Hilton and Park Place (later Caesars), and provide specific-performance as a remedy; plaintiffs allege CEC is successor to Park Place/CEOC and refused to contribute approximately $17.7 million and other amounts.
- CEOC (a majority-owned CEC subsidiary) is in an ongoing Chapter 11 in the Northern District of Illinois; plaintiffs are creditors in that bankruptcy.
- Plaintiffs assert ERISA §302 claims, two breach-of-contract claims (Allocation and Distribution Agreements), and unjust enrichment against CEC; CEC moves to dismiss and, alternatively, to transfer breach/ERISA claims to the Illinois bankruptcy court under 28 U.S.C. §1412.
- Court finds (1) unjust enrichment claim fails because an express contract governs the subject matter and dismisses it with prejudice; (2) breach and ERISA claims require adjudication of CEOC’s liability (CEOC has “skin in the game”), so the case is “related to” CEOC’s bankruptcy; (3) transfer under §1412 to the Northern District of Illinois is warranted in the interests of justice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Parent liability for subsidiary contracts (signatory/alter-ego) | CEC is successor/controlling entity and can be held liable for obligations allocated to Park Place/CEOC | Non-signatory parent is not liable absent intent to be bound or alter-ego facts | Plaintiffs’ complaint lacks sufficient factual allegations that CEC manifested intent or domination; claim vulnerable but not decided on merits here (may be amendable) |
| Unjust enrichment vs. express contract | Plaintiffs seek quasi-contractual recovery from CEC as alternative to contract claims | Existence of valid, enforceable contracts governing the dispute bars unjust enrichment | Dismissed with prejudice — express contract governs subject matter, so unjust enrichment fails |
| ERISA funding claim (minimum funding and joint/several liability) | Plaintiffs allege failure/refusal to contribute and joint/several liability of CEC and CEOC | Plan met minimum funding historically; to state claim plaintiffs must plead imminent threat of failing minimum standard; joint/several liability requires predicate employer responsible for contributions | Court notes plaintiffs have not pled imminent/future funding failure; joint-and-several liability requires finding an employer responsible for contributions; ERISA claim transferred (not finally decided) |
| Transfer under 28 U.S.C. §1412 and "related to" jurisdiction | Plaintiffs oppose transfer; emphasize plaintiff’s choice of forum and that action won’t automatically trigger CEOC liability | Transfer appropriate because outcome could conceivably affect CEOC’s estate; §1412 applies to non-Title 11 "related to" actions; judicial economy and risk of inconsistent rulings favor transfer | Court holds the case is "related to" CEOC’s Chapter 11, §1412 applies, and transfer of breach-of-contract and ERISA claims to Northern District of Illinois is in the interests of justice |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not accepted as true on motion to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (complaint must state plausible claim)
- Celotex Corp. v. Edwards, 514 U.S. 300 (scope of bankruptcy "related to" jurisdiction)
- New Horizon of N.Y. LLC v. Jacobs, 231 F.3d 143 (4th Cir.) (civil action is "related to" bankruptcy if outcome could conceivably affect the estate)
- MBIA Ins. Corp. v. Royal Bank of Canada, 706 F. Supp. 2d 380 (S.D.N.Y. 2009) (non-signatory generally not liable on another’s contract absent manifestation of intent to be bound)